As health costs rise, employers look to wellness, high deductibles

As workers scan brochures and charts outlining health-insurance options for 2011, most will find that their plans cost more, cover less - or both.

Arizonans who get health insurance through their workplace will pay a greater share of health-insurance premiums or face rising deductibles and co-payments for doctors visits, hospital stays and prescription drugs.

Employers, also facing rising costs, are sharing the pain with their employees. They are seeking to halt rising costs by promoting good health with wellness programs, health coaches and financial incentives for workers who adopt healthy lifestyles.

These sweeping changes come as employers adjust to the first wave of requirements in the nation's new heath-reform law. Requirements in future years are expected to more significantly affect how employers provide health insurance and share health costs with their workers.

One survey of 41 Arizona employers released this week found the cost of the average health-insurance premium increased 6.8 percent last year, to an average of $9,493 per employee.

Without changes, the cost of those same plans would rise 9.7 percent next year. Employers have made a variety of cost-saving maneuvers expected to drop the increase to 5.3 percent, according to Mercer, a benefits-consulting firm that published the survey.

Those figures account for the total cost of the health-insurance premium - the amount paid by both employer and employee. Another recent survey by the Kaiser Family Foundation and Health Research & Educational Trust found that the typical worker this year paid 14 percent more in health-insurance premiums compared with one year before, in part due to the employers' cost-shifting strategies.

While Mercer did not estimate employee-paid costs, its survey showed that 39 percent of Arizona companies would increase employees' share of health plan costs and 20 percent would shift health costs to employees in other ways.

The cost shift means workers such as Robert Gonzalez can expect a bigger chunk of their paycheck will go toward health benefits in 2011. The Chase employee in downtown Phoenix completed his benefits enrollment last month and stuck with his same health plan, even though his monthly contribution will increase $26.

"It was definitely a big increase, but it's the coverage I want," Gonzalez said.

Benefits consultants and analysts said the companies, squeezed by the tough economy and rising insurance rates, have aggressively sought to deflect costs by changing plans or insurance companies. They also have passed along costs to workers.

"Many employers have had to pull that lever probably more than they would like to," Lee Reichenbach, managing principal of Aon Hewitt's Health and Benefits practice, said of sharing costs with employees. "Most employers are ensuring that the plans are as financially efficient as possible."

Health reform

Although this is the first year that people will enroll in plans under the nation's new health-care law, most analysts say that health reform has had a negligible impact on health-insurance premiums.

Major changes include preventing insurers from capping lifetime benefits for individuals and extending coverage to workers' adult dependents up to the age of 26. Analysts estimate that the health-reform provisions have added 1 to 2 percent to total premium costs.

Employers and insurers are gauging potential costs that may arise when many reform provisions take effect in 2014. That year, nearly everyone will be required to have insurance and employers will need to ensure their plans are affordable for employees based on their household income. Employers will be required to provide insurance vouchers for some moderate-income employees if the health plans cost too much.

Patricia Larsen, a principal with Mercer in Phoenix, said a major trend is for employers to encourage workers to get healthier by promoting wellness programs and offering health coaching. If companies act now to encourage their workers to get healthier, it may pay off with fewer claims and more affordable health plans for employees over coming years.

"Everybody is looking into what kind of wellness programs or health-management plans they can offer," Larsen said.

Healthy workforce

The idea is that if employers flag potential health problems before they arise, they also can encourage employees to make changes that lead to healthier lifestyles.

Some companies require employees to submit to biometric screening, which can measure things such as high blood pressure, cholesterol levels and diabetes risks.

Employers typically do not get health-test results for individual employees. They get results for groups of employees. The results may help companies decide whether they should make health coaches or disease-management programs available.

Scottsdale-based RSC Equipment Rental is rolling out a program through UnitedHealthcare that rewards employees and their dependents with cash in the form of health savings-account contributions. Employees can earn up to $375 for an individual or $750 per family if they fill out a health survey and keep current on preventive health care.

The company offers employees a paid day off for completing a well exam or other preventive care such as mammograms or colonoscopies. The health-risk questionnaire gauges risks such as obesity, diabetes or family medical history. Non-tobacco users also get a 10 percent discount on premiums.

"The reception has been very positive," said Mitch Holder, RSC's director of compensation and benefits. "We know that a healthier workforce will help lower our cost curve."

High deductibles

Arizona employers increasingly are offering high-deductible plans that require employees to pay most health costs up to a certain level - $2,000 or $5,000, or whatever amount the employer has set. These high-deductible plans often are combined with a health-savings account that allows workers to save money for anticipated health expenses.

About one-third of Arizona companies plan to offer what insurers describe as "consumer-directed plans" next year that combine a high-deductible plan with a health-savings account. Even large companies with 20,000 or more employees in Arizona are increasingly offering these plans, Larsen said.

Employers such as Barnet Delaney Perkins Eye Center are tackling higher insurance costs by scrutinizing plans and shopping around. The Phoenix-based eye center faced a 20 percent hike for its existing health plan, so the company switched to another plan with a $5,000 deductible per employee.

Chief Executive Officer Mark Rosenberg realizes that the higher deductible means some employees will need to dig deeper to pay for medical services.

But he did not to break one company tradition - he has paid 100 percent of health-insurance premium costs for employees for the past 15 years.

Rosenberg said the company pays about $2 million each year to provide health insurance for its 400 employees.

"We really tried to hold the line on providing our employees an option of medical plan (premiums) that are paid 100 percent," Rosenberg said.

Creative cuts

Other companies are resorting to other methods to keep costs lower. Among the strategies: bringing health care to the workplace.

Some employers have cut down successfully on health costs by establishing on-site health clinics that are arranged by companies such as Davison Benefits Group and Healthcare Solutions Center. Typically, these clinics are staffed by nurse practitioners and can provide routine medical care for employees.

Frances Ducar, owner of Healthcare Solutions Center, said the on-site clinics work well with companies that fund their own insurance plans and offer high-deductible health plans.

Ducar said her company's clinics, located at employers such Earnhardt Auto Centers' car dealerships, have robust use among workers seeking routine care.

Workers with high-deductible plans may skip the doctor for a sinus infection or sore throat because they don't want - or can't afford - to pay for such care. But they often will take advantage of quick medical care that is available at work.

"The sick people cannot afford the higher (deductible) insurance," Ducar said. "People can use our clinics for preventive care and chronic-disease management."